Finland and Russia: Expertise through experience

Finland's Prime Minister Matti Vanhanen (left), Russia's President Vladimir Putin and Finnish President Tarja Halonen arrive for the Meeting of Heads of State or Government in Lahti in October 2006. Photo: The Council of the European Union

As Russia’s significance re-emerges in world politics and economics, can the Finns still claim to be the West’s foremost experts on their neighbour?

With a common border more than 1,300 kilometres long, Finland has always been closely tied to its eastern neighbour. From being a part of the tsarist empire to becoming the Soviet Union’s capitalist confidant, the country can boast generations of people intimately familiar with the Russian business and policy environment.

Moreover, as Timo Vihavainen, professor of Russian studies at the University of Helsinki maintains, “The two nations do share certain cultural traits, such as fondness of sauna, dachas (country cottages), and – of course – vodka. This affinity creates a sense of connectedness which has been helpful in finding common ground.”

With the post-communist state’s re-emerging importance in world politics and economics, can the Finns still vaunt themselves as the West’s leading experts on Russia?

Academic aspirations

Markku KivinenPhoto: University of Helsinki / Aleksanteri Institute

When the Cold War ended, academic research on Russia was scaled down in most western countries. In Finland, however, the opposite was true. The mid-1990s saw the founding of the Aleksanteri Institute, a research centre affiliated to the University of Helsinki focusing solely on the former Soviet bloc countries. This chimes well with the University’s history. Founded in 1640 as the Royal Academy of Turku, it was relocated to Helsinki by Tsar Alexander I and renamed the Imperial Alexander University.

Concentrating mostly on social sciences and humanities, the Institute publishes widely on Russian politics, economics and society. Despite some claims that the Finns possess no exclusive knowledge in these areas, Professor Markku Kivinen, director of the Institute, aims high: “In research, instruction and expertise pertaining to Russia and eastern Europe, the Institute is one of the largest establishments in Europe and as a research institution has the ambition to become the most important one.”

Business as usual

In commerce, Finland’s geographic advantage is obvious. At present, one third of Russia’s imports go through Finland and although almost 60 percent of Finnish trade takes place within the EU, Russia remains Finland’s single most important export destination. But apart from mere logistics, the origins of Finnish easterly business expertise stem from the Soviet era (while some branches of commerce have been Russia-oriented since the 19th century).

After the Second World War, Finland was forced to pay the Soviet Union sizeable war reparations, mostly in industrial products. These reparations later formed a basis for Finnish-Soviet trade. In contrast to Soviet trade with other western nations, which was conducted in hard currency, Finnish-Soviet trade was based on bilateral clearing agreements. Consequently, Finland was the Soviet Union’s most important western trading partner for decades, surpassed only by West Germany from the early 1970s onwards. Even in the early 1980s, over a quarter of Finnish exports still went to the socialist state.

This largely politically determined and export-focused trade was ruptured with the dissolution of the Soviet Union in the early 1990s. However, the past 10 years have witnessed the emergence of new kinds of economic ties. Besides trading, Finnish companies now also invest in Russia.

For instance, the Russian market takes 17 percent of the production of Nokian Tyres, making the firm the market leader in high-end winter tyres in the country. Stockmann, a retail concern, has spearheaded the development of western-style department stores in Russia for 15 years. Given the history of commercial links, the Finns claim to possess special knowledge of the local market and administration that other foreign investors lack.

However, some fear that this competitive edge is under threat. As the seasoned Soviet trade specialists age, know-how is disappearing year by year. “At the moment, there is no generation to whom we could transfer the current knowledge,” one expert told Helsingin Sanomat, a Finnish daily.

One attempt to address the issue has been via the 2004-2007 Russia Programme of the Finnish National Fund for Research and Development (SITRA). By offering consulting expertise and aid in networking, it has helped over 70 Finnish-based companies to expand in Russia.

Political competence

Finland has also been active in promoting political cooperation between Russia and the West. In 1997, the Finns presented a major EU foreign policy initiative labelled the ‘Northern Dimension’, aimed at addressing problems common to northern Europe by intensifying collaboration among the Union members and neighbouring countries. Unorthodox for the club, Finland managed to include Russia – a non-member – in the elaboration of the policy content. The process was taken further during the Finnish EU presidency in the latter half of 2006.

During its chairmanship, Finland also played a vital role in opening dialogue between the bloc and Russia on energy policy and initiated renewal of the bilateral EU-Russia Partnership and Cooperation Agreement.

A railway line from Helsinki to St Petersburg was opened in 1870. This picture from the early 20th century shows the station at Kouvola, SE Finland, one of the stops along the line.Photo: The National Museum of Finland

As with business, understanding Finland’s political role in EU-Russia relations requires a historical perspective. In the 19th and early 20th centuries, when Finland was still an autonomous Grand Duchy of imperial Russia, the country’s political leaders assumed a pragmatic approach in dealing with the Tsarist rulers. The aim was to prevent infringements on Finland’s self-rule by assuring the Russians that both countries would benefit from peaceful coexistence.

The same ‘bend-but-don’t-break’ doctrine was also adhered to after World War II, when Finland tried to maintain its independence as a small capitalist nation at the doorstep of a communist military superpower. This necessitated compliance with many Soviet post-war demands, including signing a treaty obliging Finland to resist attacks by “Germany and its allies” (i.e. NATO) against itself or against the Soviet Union through Finland.

Critics of the doctrine, both Finnish and foreign, called it ‘Finlandisation’ – a derogatory term that referred to the way Finns moderated their foreign and domestic policy to match the values they thought the Soviets would prefer and approve. Those most concerned with the issue feared that the entire western Europe would fall under Soviet influence. To this day, Finlandisation remains a sensitive issue in Finnish public discourse.

Pragmatic approach

When the military competition between two nuclear alliances came to an end, Finland quickly anchored itself to the West by joining the EU. A friendly relationship with the new Russia was retained via treaties on general cooperation and trade.

With the EU’s recent enlargement to former Soviet bloc countries, the number of Union members with extensive political experience of Russia has multiplied. However, according to Hiski Haukkala, a researcher at the Finnish Institute of International Affairs, Finland differs from others precisely in its historically rooted tendency to pragmatism. “Unlike many central and eastern European countries traumatised by communist-era experiences, Finland’s relationship with Russia has always been based on realistic and down-to-earth interaction. This has been instrumental in building trust towards Finnish policies among Russian elites.”